78 year old Larsen & Toubro (L&T), which is India’s largest engineering firm has decided to terminate 14,000 employees in a single go. This is being described as India’s largest ever layoff.

14,000 employees represent 11.2% of total workforce of L&T in India.

L&T’s total assets as on March, 2016 was $34 billion, and it churned out revenues worth $15 billion in last financial year. And it generated quite a handsome profit as well. During first half of FY-2017, L&T generated revenues worth Rs 46,885 crore, which is 8.6% more compared to last year. At the same time profits increased to Rs 2044 crore, compared to Rs 1197 crore a year back.

If the company was in green, then why was the decision to termination 14,000 employees was taken?

Reason For Layoff: Attempt To ‘Right Size’ Its Strength

As per the top management of L&T, the massive layoffs is being done to bring its workforce under the ‘right size’, and to remove thousands of ‘redundant’ jobs. Although it hasn’t yet been shared, but automation can be a strong reason for the mass layoffs.

L&T’s Chief Financial Officer R Shankar Raman tried to justify the terminations of 14,000 employees, as he said, “The company has taken a lot of initiative to right size staffing in various businesses. The digitisation and productivity enhancement initiatives taken by us boiled down to redundancies of roles and we have been able to shed as a group 14,000 in the six months to September..’

Hence, the process to termination employees was on since April, 2016, and till September, 2016, L&T has successfully fired 11.2% of its workforce.

When asked about the business verticals which faced terminations, Raman said, “Financial services has defocused on certain lines of businesses and has let go a lot of people. Same is the case in minerals and metals..”

Possible Explanation of Layoffs

While issuing statements, L&T gave subtle hints of the economics of firing. First of all, its slow business and increased competition. Construction arm of L&T suffered major losses last year, and this was the reason it created a ripple effect across the business conglomerate.

L&T Finance Holding, the non-banking finance arm of the company asked 550 of its employees to leave in April this year, and L&T Infotech has been experiencing attrition rate of 18% since last few quarters.

Besides, falling oil prices globally has also impacted L&T’s main business of engineering and construction as several projects in Middle East was stopped in between.

Unlike some analysts are claiming, the current demonetization move cannot be the reason for such large scale terminations of L&T employees, as the process had started 8 months ago. But how will termination of 14,000 employee impact Indian engineering and construction sector, this we will have to wait and watch.

Mohul keenly observes the nuances of Indian startup world; and tries to demystify the secrets behind Technology, Marketing, Mobile and Internet. He is a Writer by passion, Marketer by choice and Entrepreneur by compulsion. Follow him on Twitter here: @_mohul